Tuesday, October 23, 2007

EPF should not abdicate its obligation

EPF should strive for higher dividends

I refer to “EPF scheme to help members save more for retirement” (Star October 23).

The Employees Provident Fund’s (EPF) initiative to introduce the “Beyond Savings” scheme to help its members to save more for retirement should be commended.

The plan to allow all EPF contributors to withdraw part of their funds to invest in schemes like unit trusts may no doubt bring greater returns on the long run but it is not without risks. There is no guarantee that investing in such schemes will automatically bring bigger profits than that offered by the EPF itself.

Investing in such schemes requires knowledge and acumen to manage these funds which I am afraid many, even among the upper income group, may be lacking. To these contributors it may be better to depend on the dividends provided by the EPF that guarantees security rather than invest for greater profits in schemes that they are not familiar with. They run the risk of being victimized by agents who are out to make quick profits. The EPF management is in a better position to manage these funds more prudently and it should strive harder to provide higher dividends to its members rather than living it to them to do so.

The primary aim of the EPF is to provide post-retirement funds for its members by their compulsory savings throughout their working life. It should therefore be very careful in deciding the quantum of the “required amount” in the various accounts, the excess of which a contributor can withdraw for other more lucrative investment purposes. The amount available to the contributor at any one time must be adequate to support him and his dependents if any untoward happens to him. If this is not so it would defeat the very purpose for which the fund was set up.

Currently EPF contributors are allowed to withdraw their retirement savings for various purposes – unit trusts, medical expenses, children’s education and housing. If an average earner were to withdraw his savings for all these reasons I am afraid there will be not much left when he retires especially now when life expectancy is prolonged by better medical care.

The RM500 a month is a gross underestimate of the needs of a retired individual. It would be hardly sufficient to sustain oneself on that amount considering the escalating cost of living these days.

Providing investment opportunities outside for greater monetary returns for its members is definitely an encouraging move by the EPF. At the same time it must also consider the undesirable consequences of such moves – the premature depletion of hard earned savings by ignorant misuse.

The government on its part should not use it as an excuse to abdicate its moral obligations to the rakyat. It is the responsibility of the government to provide affordable and quality basic healthcare, education and housing for the people, particularly those from the lower income group. It would be unfair to expect them to use up almost all their retirement funds to “self-finance” these basic amenities which, as a result of over-enthusiastic privatization, have become beyond the means of the majority of the people.

Dr.Chris Anthony

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